San Francisco cord-cutters are adept at piracy, want Netflix cheap

Netflix's streaming video on-demand service is a tough sell among some San Francisco consumers.

Netflix's streaming video on-demand service is a tough sell among some San Francisco consumers. (Victor J. Blue / Bloomberg)

Ryan Faughnder

While the tech-savvy residents of the Bay Area have brought us innovations in search, social media and ecommerce, they are also adept at something less savory: Internet piracy.

That’s especially true among cord-cutters and cord-nevers, or people who have decided to forgo paying for traditional TV packages in favor of online content, acquired legally or otherwise.

Unfortunately for the industry, San Francisco cord-cutters seem more inclined to steal their entertainment, according to Sanford C. Bernstein analyst Todd Juenger, who hosted a focus group of cord-cutters in San Francisco last month.

“All but a handful of the SF panelists cited pirating (illegal downloads) as a common mechanism,” he wrote in a research report published Monday. "Perhaps it is the proximity to the tech-savvy Silicon Valley. One panelist had two servers for illegal content and would download content without watching it just in case they wanted to later."

Everyone on the San Francisco panel said they use Netflix but most do not pay for it or any other subscription services for that matter. Sharing Netflix, Hulu Plus and HBO Go accounts is common practice in this group.

Perhaps unsurprisingly, the San Franciscans were largely unwilling to pay more than the $8 a month it costs to stream Netflix online, if they paid for it at all. In contrast, the New York cord-cutters -- few of whom were illegal downloaders -- were willing to cough up as much as $20 a month.

Unlike those in New York, the San Francisco panelists did not envision a future in which they would pay for a TV subscription. Many gave up on pay TV when they left home for college or moved into apartments.

The consensus was that there is no need to subscribe when what they want is available online, and some predicted that pay TV as we know it would not exist 10 years from now.

Juenger posed a hypothetical a la carte package in which the participants could pay $5 a month for each channel they wanted. Illustrating the extent of the unwillingness to pay for TV, some chose to buy no channels. Among those willing to pay, the top choice was AMC, the home of "Mad Men" and "Breaking Bad."

Some said they would pay for up to eight channels, making a $40 package, but those same people said they wouldn’t pay $40 for a complete cable roster, indicating cord-cutters just don’t like paying for a product they don’t use.

“It's not that this participant is bad at math,” Juenger wrote. “This person did not want the pay-tv product, plain and simple.”

In other interesting observations, the focus group showed little awareness of or satisfaction with Amazon.com Inc.’s Prime Instant service, which competes with Netflix.